Can We Expect the European Union to End Soon?

2011-11-28It's no secret that the European Union is on the skids - every day new twists in the sovereign debt crisis dominate the headlines. But if the EU does break up, what will rise in its place? Jeff Thomas explores and weighs the possibilities.

Well, it certainly seems to be the most sensible outcome, doesn't it? After all, a Greek default at this point is not a question of "if", but "when". Recently Jean-Claude Juncker, Prime Minister of Luxembourg, stated, "This will be the last bailout for Greece."

Along with other political leaders in Europe, Juncker is finding that public sentiment opposing the bailouts cannot be held back indefinitely. Even Angela Merkel is now doing her best to sit on the fence, but the fence is a difficult position to maintain. The more time passes, the less likely it is that she will be able to remain there. She is not being helped along by Mr. Sarkozy, who is doing his best to avoid saying anything at all, letting Mrs. Merkel take the heat.

Shutting the tap off may be delayed, but not avoided. The recent decision to allow Greece to default on 50% of its debt, while calling the default something else will not pass muster with EU taxpayers. Now that a partial default has (however euphemistically) been accepted, the illusion of a possible solution cannot be maintained for long.

There are those who will be inclined to say, "Good riddance," to Greece, as, most certainly, they have created their untenable fiscal problems themselves through political promises of unsustainable entitlements. Many observers imagine a situation in which Greece will simply cease to be a participant in the EU, but it will not be that easy by a long shot. The Greek default will trigger a string of bank failures in Europe and, of course, in the US, as the US has made a major contribution to the EU bailouts.

The collapse of the euro and a reshuffling of the EU are inevitable. As such, many pundits are speculating on whether they will split into two EU's, with a northern, Teutonic EU, and a southern PIGS EU. They also speculate that some countries will choose to return to their previous currencies. Each of these pundits seems to be creating his speculations based upon what might be most practical for the efficient management of those countries. If so, they are using the wrong reasoning, as this is not the reasoning that will be used by those who will make the decisions - the leaders of the EU countries.

To more accurately project the directions that will be taken by the various countries, the first premise is to acknowledge that the leaders of these countries did not create the EU for the benefit of their citizenries. They created it to safeguard and increase their own power. The citizenries never asked for the EU. While they did support open trade agreements as being beneficial for all, they never requested a central government, with its own constitution, laws and currency. This was the invention of the political leaders.

The advantages to the leaders in creating the EU were considerable. They could share a larger playing field. They would have the opportunity to pool tax dollars, increasing the confusion as to where the money was going. They could impose a massive new constitution all in one go (without input or approval from the public). Best of all, they could create a new government in Brussels that was not subject to election by their citizens, to be appointed by the leaders themselves. Pretty clever.

Having achieved this bloodless coup, the likelihood of the leaders being willing to now give it up just because it doesn't work is a pipe dream. At this point, it is abundantly clear that the countries of the EU are so disparate that it is not possible to get the various populations to agree to a uniform set of policies. (For example, we will not live to see the day when the Greek people become as disciplined and industrious as the German people. The two populations therefore cannot be cajoled into accepting uniform policies regarding work and entitlements.)

The various cultures are in fact so disparate that the countries of Europe have been at war with each other on a regular basis since time immemorial. However, I would suggest that even in light of these insurmountable differences, the leaders will do everything they can to hold onto the EU concept, no matter how detrimental it may be to the citizens.

In this effort, I believe that we are likely to see two schools of thought emerge amongst the leaders.

Those of the northern countries will try to retain as much as possible the power that has been gained, while adjusting to the PIGS problem. They will hope to find a way to keep the entire EU intact, even though it would damage their own countries. (A close examination of Mrs. Merkel's seemingly confused recent comments and actions can be explained by this understanding.) If public opinion becomes so rabid that the present EU cannot be held together with gaffer's tape and binding twine, the fall-back position may be a smaller, Teutonic EU. Certainly, preliminary discussions have taken place between Germany, the BeNeLux countries, Austria and Finland to this end.

The PIGS are a different matter. They have begun a state of collapse, and they are aware that they cannot come out of this well. Recently, the EU placed new leaders in power in both Italy and Greece, each of whom can be expected to be more beholden to the EU than to the voters of the respective countries (who did not have the opportunity to vote for or against them.) The leaders of the other PIGS nations will hold on to their power as long as they can, and their actions and decisions are likely to become increasingly reckless as their desperation grows.

Ultimately, they will be after saving their skins above all else, and this does not bode well for the citizenries of those countries. Will they try to forge a southern EU? Possibly, but they know already that it cannot succeed, as there would be no one left to pay the bills. Will they pass austerity policies? Yes, but they will not be as austere as they need to be, because their voters will not countenance such drastic action, however necessary. In the end, they will tread water until they are voted out, as failed rulers always do.

If these failed rulers are replaced by election, they will be replaced, not by honest candidates who proclaim the necessity of severe austerity, but by those who say that they can somehow "fix" the problem without significantly removing entitlements. The new leaders will, of course, also fail, as their promises will not have been based upon sound suppositions. They will do all they can to shift the blame to the previous leaders, but in the end, they, too, will be voted out, only to be replaced by another group of pretenders.

Conversely, if southern leaders are replaced by EU appointees, major confrontations will soon develop between the new leaders and the voting public, as the voters will bristle at EU-forced austerity measures. Economic, political and social chaos is almost assured.

But will there be no end to this decline? Will there be no recovery? Yes, there will, but it will not be a "blossoming". It will be a slow slog through the mire, as it always is in such situations.

Initially, anger will reign amongst the peoples. As the entitlements slowly disintegrate, they will have their extended tantrum - rioting, burning cars, looting stores, and so on. But, eventually, they will tire of this and slip into acceptance of their fate. And then, despair will set in.

As odd as it may seem, this will be the turning point. Once acceptance occurs, the slow rebuilding process becomes possible.

So, there are questions remaining: Will some of the countries revert to their previous currencies? Very likely. Will there be two unions? Possibly. Will there be a United States of Europe? Highly unlikely, but that doesn't mean that the leaders will not attempt to push it through.

The important thought to keep uppermost in mind, as the debacle moves through the next few years, is that like the similar debacle that is now unfolding across the pond in America, what is best for the country will not be what is proposed by the leaders. Their proposals and decisions will be driven by self-interest, not the public's interest. They will consistently continue to push for those measures that will not only ensure their power, but enhance it.

If we, as observers, keep this basic premise in mind, our ability to foresee events will be increased.